Accounts Payable:

Accounts Payable is an accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable appears on the left side of the balance sheet under the heading current liabilities. Accounts payable are often referred to as "payables". A current ratio (current assets/current liabilities) of 1.5 or 2 to 1 indicates that a company has sufficient funds to pay its accounts payable on a timely basis.

Accounts Payable refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors. At the household level, people also record bill payment for goods or services provided to them by creditors. In households, accounts payable are ordinarily bills like bills from the electric company, Telephone Company, cable television, newspaper subscription, and other such regular services.

Accounts payable is also used as a term to the unit within the organization’s accounting department to manage the payments. The accounts payables used in an organization include authorizing purchase orders, organizing account withdrawals, auditing expense reports etc.

Householders usually keep a track of the bills and pay on a monthly basis by hand using cheques or credit cards. In a business, there is usually a much broader range of services in the A/P file, and accountants or bookkeepers usually use accounting software to track the flow of money into this liability account when they receive invoices and out of it when they make payments. Many large firms are increasingly using specialized Accounts Payable automation solutions (commonly called ePayables) to automate the paper and manual elements of processing an organization's invoices. 

Questions:

• What is Accounts Payable?
• How does a company and householders keep a track of Accounts Payable?
• What is an accounting software? How does it serve as a useful tool to the company?